Thursday, July 21, 2011
Wednesday, July 20, 2011
The Case for Defined Benefits and Retirement Security!
Subject: The Case for Defined Benefits and Retirement Security!
By Willie L. Pelote Sr.
In America, anybody who works for a living should be able to afford to retire.
That's why shunting newly hired and/or existing civil servants into defined contribution or 401(k)-style plans to save taxpayers money, as a new report  by the Kellogg School of Management and the Simon School of Business suggests doing, is a bad idea.
Doing this will actually cost taxpayers more money and severely weaken retirement security for all Americans.
This is because 401(k)-style plans are inferior to, and less efficient than, traditional, defined benefit retirement plans or pensions.
Inferior because few individuals have ever saved enough money through stock market investments in a 401(k) to finance an adequate retirement.
Inefficient because 401(k)-style accounts are more expensive to maintain than traditional, defined benefit plans.
Money managers who administer 401(k)-style plans can collect commissions and administrative fees on the money sitting in the accounts, regardless of whether or not a trade or transaction occurs.
These practices routinely devalue 401(k) style retirement savings by at least 20 percent.
That's why individuals with 401(k)-style plans usually have less than half the benefits of traditional, defined benefit retirement plans.
Worse, taxpayers will have to subsidize these miscellaneous charges, and this will cost significantly more than maintaining traditional, defined benefit retirement plans.
Defined benefit retirement plans protect retirement security by pooling wealth.
The money stays in the system and is there to support surviving retirees.
A 401(k)-style plan will never have the advantages and efficiencies of traditional, defined benefit retirement plans and will never be able to provide the same high level of retirement security.
Retirement systems in other countries based on defined contribution or 401(k)-style plans, such as Chile's, which was imposed under dictatorial rule in 1973, are a complete disaster.
Requiring pension administrators to build up a reserve to meet their obligations to current and future retirees in the case of insolvency presents no imminent danger to taxpayers.
As long as employee and employer contributions continue to roll in, defined benefit retirement plans will be fine.
This is where the public pension plans administered by local and state governments have fallen down recently.
The Great Recession shrank the investment income of public employee retirement funds, and politicians failed to set adequate levels for pension contributions in good times.
Fortunately, defined benefit retirement plans for civil servants are now making a robust recovery, according to a recent report  by the National Conference of Public Employee Retirement Systems (NCPERS).
Retirement systems can cover more than three-quarters of their obligations now, and they are generally considered fully funded when they can cover more than 80 percent of their obligations.
People are confusing immediate budget gaps with long-term deficits.
Taxpayers are right to be concerned about how our tax dollars are being spent, especially in light of the billions given to bail out the financial institutions responsible for our current economic crisis.
Given the fact that Wall Street is responsible for our budget deficits at the federal, state, and local level, it's Wall Street, not Main Street, that should bear the cost of cleaning up this economic mess.
Proposals aimed at shunting civil servants into 401(k)-style plans or converting traditional, defined benefit retirement plans into defined contributions plans will only benefit the same Wall Street banks that brought about the Great Recession.
These efforts must be seen for what they are and quickly placed in the circular file where they belong.
CentralOhio.com • July 26, 2010
Want to go back to subbing....better not make too much money!
To: Mary Jordan
Sent: July 20, 2011
Subject: RE: re:STRS Rules on Retire/Rehire
· On April 13, Rep. Richard Hollington introduced House Bill 202. This bill includes provisions dealing with reemployed public employees. Basically, it would require anyone who is receiving retirement benefits from one of the Ohio systems, including STRS Ohio, to forfeit $1 of their retirement benefit for each $2 earned above an annual threshold amount of $14,160. This threshold amount, or “excess earnings base” as it is referred to in the bill, would be adjusted each year by the actual average increase, if any, in the consumer price index (CPI).Here’s an example of how a reemployed retiree’s pension could be reduced: Assume a retiree is receiving a yearly pension of $38,000. This individual returns to work in a public position covered by one of the Ohio retirement systems and receives an annual salary of $35,000. This salary exceeds the threshold amount of $14,160 by $20,840. The retiree’s pension would be reduced by $10,420 (one-half of the excess amount). The bill’s language does not detail how this new rule would be implemented, monitored or enforced.
From: Mary Jordan
Sent: Tuesday, July 19, 2011
To: Knoesel, Sandy
Subject: re:STRS Rules on Retire/Rehire
Monday, July 18, 2011
Approved minutes from the June 30, 2011 meeting of the Ohio Retirement Study Council.
YES:Sen. OelslagerSen. TavaresRep. RamosRep. SchuringRep. WachtmannMs. MillerMr. Morgan
YES:Sen. OelslagerSen. TavaresRep. RamosRep. SchuringRep. WachtmannMs. MillerMr. Morgan
Sunday, July 17, 2011
A well-deserved promotion for Rich and....some behind the scenes fun!
From John Curry, July 17, 2011
At a White House event Monday, Obama will announce his choice of Cordray, 52, who is currently serving as director of enforcement for the new agency called the Consumer Financial Protection Bureau.
By picking Cordray, Obama hopes to avoid a bruising Senate confirmation battle that would have occurred had he selected Elizabeth Warren, the Harvard law professor who came up with the idea and ultimately helped to set up the agency.
"Richard Cordray has spent his career advocating for middle class families, from his tenure as Ohio's Attorney General, to his most recent role as heading up the enforcement division at the (bureau) and looking out for ordinary people in our financial system," Obama said.
Sen. Sherrod Brown, D-Ohio, called the selection of Cordray a "great move. There's no question of Rich's qualifications."
He predicted the Senate will likely confirm Cordray for the post "unless they get to be hyper-partisan. My only fear is Republicans don't think we should have consumer protection rules."
The Cordray selection places pressure on Sen. Rob Portman, R-Ohio, who has voiced objections about some of the powers of a new agency. Brown said, "I fully expect Rob Portman to support Rich Cordray."
Obama acknowledged Warren's leadership in a statement announcing Cordray's nomination, thanking Warren "not only for her extraordinary work standing up the new agency over the past year, but also for her many years of impassioned leadership, and her fierce defense of a simple idea: ordinary people deserve to be treated fairly and honestly in their financial dealings.
"This agency was Elizabeth's idea, and through sheer force of will, intelligence, and a bottomless well of energy, she has made, and will continue to make, a profound and positive difference for our country," he said.
Warren, who hand-picked Cordray to serve in the agency shortly after his loss in last November's elections, expressed support for his selection.
"Rich has always had my strong support because he is tough and he is smart-and that's exactly the combination this new agency needs," she said. "He was one of the first senior leaders I recruited for the agency, and his work and commitment have made it clear that he will make a stellar director."
If confirmed by the Senate, Cordray, a Grove City native and former "Jeopardy" champ, will lead a new, independent agency tasked with acting as a watchdog for American consumers. The bureau's mission is to prevent abusive and deceptive financial practices and ensure that consumers have the information they need to make the financial choices that are best for them.
Though the bureau is set to open its doors Thursday, it's been active in the year since its creation, pushing initiatives aimed at making credit card providers simplify their forms so consumers can better understand the fees and costs associated with credit; working to simplify the forms that consumers receive when they shop for a mortgage so they have easy-to-understand information that helps them compare different mortgage offers and find the one that's best for them; and policing abuses in consumer financial products like credit cards and mortgages and for making sure people have the information they need to make the decisions that are best for them.
In an interview with the Dispatch last month, Cordray said his credo is "simplifying and clarifying" complex financial agreements so average consumers can understand what they are buying. For example, all too often, credit card agreements were so complex that even college graduates could not figure out the interest rate that would be charged and how the financial penalties would be imposed.
"If we are enforcing the law against the dishonest businesses, the ones that are competing unfairly and illegally with the honest businesses, then that's better for all concerned," Cordray said. "It cleans the markets."
Cordray has been considered a leading contender for the Democratic gubernatorial nomination in 2014. It is unclear whether his nomination to head the bureau will change his future political plans.
Dispatch public affairs editor Darrel Rowland contributed to this report.
* * * * *
Now...for our little COR(E)ner of the world..last year, Rich came to visit with CORE members and speak before our CORE meeting at the STRS building. When the administration at STRS discovered that Rich was going to address our CORE meeting (and long after we had these arrangements made) they asked Rich to address the entire board instead. (They wouldn't want to take the wind out of our CORE sails, would they?) Well....being the genius that Mr. Cordray was, he told them he would, in fact, address the STRS Board (during their lunch) AND THAT HE WOULD, AS PREVIOUSLY PLANNED, address our CORE meeting separately.
Oh...it gets even better. You see, two STRS security officers were waiting to greet Mr. Cordray from the second he stepped foot through the revolving glass STRS main entrance door (after supposedly arriving via his "state vehicle" at the STRS parking garage) so that they could usher him up to meet with the hierarchy upstairs. Little did they know that Rich was not going to arrive by vehicle but instead arrived by foot at another entrance door that was not being carefully watched by security for his arrival.
Here's where the fun began.....my friend (who at the time worked for Mr. Cordray and help arrange this meeting) advised me that Rich would arrive at the "other" door and so we would hang around the lobby and "meet and greet" long before the security detail discovered him and ushered him away. Rich walked through the "other" door, talked with us first and.....you should have seen the security boys make a rapid U-turn and head for us. Problem was, they had to wait till Rich got finished talking to my friend and I so ..... they couldn't get first "dibs." Was there a little "political gamesmanship" involved here? I think it would be fair to say that and..... we won!
P.S. A lesson to be learned by STRS security....if you see others (like my friend and myself) hanging around the reception area when all the "heavy hitters" are upstairs to attend the meeting, you might just want to keep a closer eye on the small group in the lobby.... they might just be up to something!
Above is a picture of Rich Cordray taken with CORE President, Dave Parshall at that meeting (June 2010).